You are here

Return on Assets Employed

This measures how much profit is generated from using the assets of the business. One of the true skills of managing a business is to get the best use out of assets and to maximise the profit from each asset employed. Having a machine running at only 50% productivity or lying idle is a waste of resources that could be put to better use elsewhere. Banks and potential investors are very keen to see how assets are managed as this will provide them with valuable information about the quality of management.

As a general rule, the return achieved should at least be greater than that achievable if you had simply stuck your money in a bank deposit account instead of buying the asset. Again, though, the higher the better is the rule.

The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon

2121 Pennsylvania Avenue, N.W., Washington, D.C. 20433, www.ifc.org

The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon.